First Department Affirms Dismissal of Alter Ego Allegations Based on Conclusory Pleading

By: Jeffrey M. Haber

Under New York law, alter ego liability, often referred to as piercing the corporate veil, is a doctrine that permits a court to disregard the corporate form and hold an individual officer, director, or owner liable where that person exercised domination and control over the entity and used that domination and control to commit a fraud or wrong that injured the plaintiff. Courts emphasize that mere domination or control is insufficient; instead, a plaintiff must plead particularized facts demonstrating a misuse of the corporate form, reflecting New York’s strong presumption against disregarding corporate separateness.

Against this backdrop, in Soleil Chartered Bank v. Breton Equity Co. Corp., 2026 NY Slip Op 03280 (1st Dept. May 26, 2026), the Appellate Division, First Department, affirmed dismissal of alter ego claims where the complaint relied on conclusory, information and belief, allegations of domination and failed to connect any alleged misuse of the corporate entity to a fraud or other cognizable wrong, reinforcing the heavy pleading burden required to sustain veil piercing claims in New York.

Soleil Chartered Bank v. Breton Equity Co. Corp.

Soleil Chartered was filed in connection with other actions pending in Supreme Court, New York County.[1] The first action was filed by Crestwood Services, LLC (“Crestwood”) against Soleil Chartered Bank (“Soleil Chartered”), seeking recovery from Soleil Chartered based on a standby letter of credit issued by Soleil Chartered in favor of Crestwood (the “2023 Action”).

On or about February 2, 2024, the motion court in the first action issued a preliminary conference order that set forth, among other deadlines, the date by which the parties could implead additional parties.

Following the deadline to implead, Soleil Chartered filed a third-party complaint impleading defendant, Breton Equity Co. Corp., into the 2023 case (the “2024 Action”). The third-party complaint sought relief only against Breton Equity and asserted, among other things, that if Soleil Chartered was found liable to Crestwood, then Breton Equity was obligated to indemnify Soleil Chartered based on a written indemnity agreement between Soleil Chartered and Breton Equity. Defendant, Ted Doukas, signed the indemnity agreement as an officer and owner of Breton Equity. Doukas was not named a third-party defendant in that action.

One year later, Soleil Chartered commenced the action, seeking relief against Doukas personally and the same relief against Breton Equity that it sought in the 2024 Action.

Soleil Chartered attempted to impose personal liability upon Doukas based on two theories: (a) Doukas signed the indemnification agreement in his individual capacity, as well as in his corporate capacity; and (b) alter ego liability – Doukas as the sole shareholder, principal and owner of Breton Equity directed, dominated, and controlled Breton Equity as if it was his alter ego. Soleil Chartered also alleged that Doukas wrongfully used Breton Equity to benefit himself and his family at the expenses of third parties, including Soleil Chartered.

Doukas moved to dismiss.

On or about November 17, 2025, the motion court granted the motion. The motion court found that “[t]here was no language in the indemnity agreement personally binding Mr. Doukas” and that “[t]o the extent the complaint allege[d] that Mr. Doukas signed the indemnification agreement in his personal capacity, it [was] dismissed.” The motion court further held that the part of the complaint that alleged Doukas was Breton Equity’s alter ego was dismissed.

“Generally, a plaintiff seeking to pierce the corporate veil must show that (1) the owners exercised complete domination of the corporation in respect to the transaction attacked; and (2) that such domination was used to commit a fraud or wrong against the plaintiff which resulted in plaintiff’s injury.”[2] 

Importantly, it is not enough for the plaintiff to demonstrate that the officer, director, or shareholder dominated and controlled the corporate entity.[3] The plaintiff must show that the officer, director, or member used the corporation for his/her personal benefit and the corporation was nothing more than an “alter ego” or instrumentality of the officer or member.[4] Because “New York law disfavors disregard of the corporate form,”[5] conclusory allegations of domination and control are insufficient.[6] The plaintiff must demonstrate that there was a unity of interest and control between the defendant and the entity such that they are indistinguishable.

While application of the doctrine depends on the facts and circumstances of each case,[7] several factors have emerged in determining whether the plaintiff has made the requisite showing. These factors include, among others: (1) the failure to adhere to corporate formalities; (2) inadequate capitalization (that is, the corporation or LLC does not have sufficient funds to operate); (3) a commingling of assets; (4) one person or a small group of closely related people were in complete control of the corporation or LLC; and (5) use of corporate funds for personal benefit.[8] No one factor controls the consideration.[9]

The plaintiff must overcome a “heavy burden” to plead facts sufficient to establish alter ego liability.[10]

Soleil Chartered appealed the dismissal.

On appeal, Soleil Chartered only sought review of that portion of the motion court’s order finding that Soleil Chartered’s allegations of alter ego liability were insufficient to state a claim against Doukas.

The First Department unanimously affirmed.

The Court held that the motion court “properly declined to find that Doukas [was] the alter ego of defendant Breton Equity Company Corp. and that piercing the corporate veil [was] warranted to hold Doukas personally liable for Breton Equity’s indemnity obligation.”[11] The Court explained that the “complaint’s conclusory, information-and-belief allegation that Doukas exercised dominion and control over Breton Equity [was] insufficient to support alter ego liability.”[12] 

The Court also held that even if “the complaint sufficiently alleged that Doukas exercised dominion and control over Breton Equity,” that allegation alone was “insufficient to pierce the corporate veil.”[13] The Court noted that the “complaint allege[d] on information and belief and in conclusory fashion that Doukas misused or moved Breton Equity funds,” but did “not state how the alleged abuse of the corporate form was for the purpose of avoiding the obligation to indemnify,” or “how Doukas’s domination was the instrument of fraud.”[14] “Absent more particularized statements,” said the Court,[15] “the wrong or injury alleged is essentially that Breton Equity breached its contract in failing to indemnify plaintiff, and ‘a simple breach of contract, without more, does not constitute a fraud or wrong warranting the piercing of the corporate veil.’”[16] 

Takeaway

Soleil Chartered underscores the heavy burden plaintiffs must overcome when pleading alter ego liability in New York and, in particular, the insufficiency of conclusory pleading. The Court reaffirmed that a plaintiff must do more than allege that an individual exercised control over a corporation; domination and control, even if adequately alleged, is only the first step and does not by itself justify piercing the corporate veil. Rather, the plaintiff must plead specific facts showing that such domination and control was used to commit a fraud or other cognizable wrong that caused the plaintiff’s injury.

In Soleil Chartered, the complaint failed because it relied on generalized, information-and-belief allegations that defendant controlled the corporate entity and misused its funds, without explaining how that conduct was tied to the alleged harm. The Court emphasized that allegations of wrongdoing must be particularized and must demonstrate that the corporate form was abused for the purpose of perpetrating the claimed wrong. Absent such detail, courts will not infer the requisite nexus between control and misconduct.

The Court's decision also highlights that a mere breach of contract does not constitute the type of wrong necessary to sustain an alter ego theory. Without additional allegations showing that the corporate structure itself was used as an instrument of wrongdoing, veil piercing is unavailable as a matter of law.

Ultimately, the takeaway of Soleil Chartered is that New York courts continue to require plaintiffs to overcome a “heavy burden” to establish alter ego liability: plaintiffs must allege detailed, non-conclusory facts establishing both domination and control and their misuse to commit a wrong. Boilerplate allegations of control and misconduct, untethered to a concrete fraudulent or improper objective, will not survive a motion to dismiss.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions or litigation releases and not on matters handled by the firm.

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[1] The facts of the action are taken from the motion court’s decision and the briefing on appeal.

[2] Conason v. Megan Holding, LLC, 25 N.Y.3d 1, 18 (2015) (internal quotation marks omitted); TNS Holdings v. MKI Sec. Corp., 92 N.Y.2d 335, 339 (1998).

[3] Matter of Morris v. New York State Dept. of Taxation & Fin., 82 N.Y.2d 135, 141-142 (1993); TNS Holdings, 92 N.Y.2d at 339.

[4] TNS Holdings, 92 N.Y.2d at 339.

[5] Sutton 58 Assoc. LLC v. Pilevsky, 189 A.D.3d 726, 729 (1st Dept. 2020) (internal quotation marks omitted).

[6] East Hampton Union Free School Dist. v. Sandpebble Bldrs., Inc., 16 N.Y.3d 775, 776 (2011) (noting that at the pleading stage, “a plaintiff must do more than merely allege that [the defendant] engaged in improper acts or acted in ‘bad faith’ while representing the corporation”), aff’d, 16 N.Y.3d 775 (2011); Metropolitan Transp. Auth. v. Triumph Adv. Prods., 116 A.D.2d 526, 528 (1st Dept. 1986).

[7] Ledy v. Wilson, 38 A.D.3d 214, 214 (1st Dept. 2007).

[8] Shisgal v. Brown, 21 A.D.3d 845, 848 (1st Dept. 2005) (internal citation omitted).

[9] Tap Holdings, LLC v. Orix Fin. Corp., 109 A.D.3d 167, 174 (1st Dept. 2013) (citation omitted).

[10] TNS Holdings, 92 N.Y.2d at 339.

[11] Slip Op. at *1.

[12] Id., citing Board of Mgrs. of Gansevoort Condominium v. 325 W. 13th, LLC, 121 A.D.3d 554, 554 (1st Dept. 2014).

[13] Id., citing TNS Holdings, 92 N.Y.2d at 339; Sutton 58 Assoc. LLC v. Pilevsky, 189 A.D.3d 726, 729 (1st Dept. 2020).

[14] Id., citing Sheridan Broadcasting Corp. v. Small, 19 A.D.3d 331, 332 (1st Dept. 2005); see also Olshan Frome Wolosky, LLP v. Kestenbaum, 244 A.D.3d 490, 492 (1st Dept. 2025).

[15] Id., citing Sheridan Broadcasting, 19 A.D.3d at 332.

[16] Id., quoting Skanska USA Bldg. Inc. v. Atlantic Yards B2 Owner, LLC, 146 A.D.3d 1, 12 (1st Dept. 2016) (internal quotation marks omitted), aff’d, 31 N.Y.3d 1002 (2018).